Netflix and Paramount fight for WarnerBro

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The market clearly does not like the Warner Bros situation. Both Netflix and PSKY shares sold off sharply after entering a bidding war for Warner Bros.

That said, Netflix is in a much stronger financial position to pursue this acquisition. PSKY would likely need to take on significant leverage to compete.

Netflix is widely viewed as the more likely winner of the Warner Bros acquisition, and the transaction would be positive over the long term. However, the outcome depends largely on how aggressive PSKY becomes in pushing up the purchase price.

Netflix should also be able to navigate regulatory approval, but the bigger question is the length of the regulatory process. Any delay would push out the timing of the growth benefits from the acquisition.

Management has guided to a 31.5% operating margin in 2026, up from 29.5% in 2025. Importantly, this guidance already incorporates the expected acquisition costs. On paper, this suggests management still expects margin expansion despite the deal. Even so, the market reaction has been negative, with Netflix shares still trading below pre-earnings levels.

Interestingly, Warner Bros shares are trading around 28.5, right between Netflix’s bid of 27.5 per share and PSKY’s bid of 30 per share, reflecting uncertainty over the eventual winner.

Warner Bros is expected to make its decision by April.

Verdict: Netflix appears to be the favored bidder, though it may need to increase its offer to secure the deal. Warner Bros would represent a strong strategic asset for Netflix over the long term, but the key risk is whether the market can tolerate a near-term slowdown in margins. Netflix may ultimately deliver less than the guided 31.5% operating margin in 2026, although some of this risk is likely already priced in.